Problem #2 Pedroni Construction Company has entered into a contract beginning January 1, 2107, to build...

Problem #2

Pedroni Construction Company has entered into a contract beginning January 1, 2107, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

2017 2018 2019

Costs to date $270,000 $450,000 $610,000

Estimated costs to complete 330,000 150,000 0

Progress billing to date 270,000 550,000 900,000

Cash collected to date 240,000 500,000 900,000

Instructions:

Using the percentage-of-completion method, compute the estimated gross profit that would be recognized during each year of the construction period
Using the completed-contract method, compute the estimated gross profit that would be recognized during each year of the construction period

Expert Solution

Solution a:

Computation of % of completion, revenue recognition and Gross Profit - Pedroni Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	*Total Revenue to be recoganized (F) (E D)**	Revenue for current period (G)	Gross Profit (H) (G-A)
2017	$270,000	$270,000	$600,000	45.00%	$900,000	$405,000	$405,000	$135,000
2018	$180,000	$450,000	$600,000	75.00%	$900,000	$675,000	$270,000	$90,000
2019	$160,000	$610,000	$610,000	100.00%	$900,000	$900,000	$225,000	$65,000

Solution b:

Computation of Gross Profit - Revenue on completion - Pedroni Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	Contract Price (D)	Gross Profit
2017	$270,000	$270,000	$600,000	$900,000	$0
2018	$180,000	$450,000	$600,000	$900,000	$0
2019	$160,000	$610,000	$610,000	$900,000	$290,000.00

ekkarill92 answered 1 year ago

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